AGENCY

Question 1

AGENCY

Answer 1

Agency is the fiduciary relationship that arises when one person (a principal) manifests assent to another person (an agent) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act

A fiduciary relationship between one person (agent) acting on behalf of another (the principal)

Question 2

FIDUCIARY

Answer 2

Any relation existing between parties to a transaction wherein one of the parties is… duty bound to act with the utmost good faith for the benefit of the other party.

Question 3

Sole Proprietor

Answer 3

1. fully personally liable - negative of sole proprietor

A sole proprietorship is a business owned by a single person who
1. has the sole right to manage
2. is solely entitled to the profits, and
3. has unlimited liability for the debts of the business.

Question 4

Pros and Cons of Sole Proprietorship

Answer 4

Pros
1. easy to set up
2. all profits belong to owner
3. owner has full authority to manage
4. straightforward bookkeeping since the owner and business are

Cons
1. owner may not have considered set-up options
2. owner is personally liable for all debts
3. owner has to do everything
4. self-employment tax, and all income is taxed at personal income rate.

Question 5

Vicarious Liability

Answer 5

a defendant who is not charged with personal fault or wrongdoing may be held liable for the tortfeasor’s act because of the defendant’s relationship to the tortfeaser

Question 6

Respondeat Superior

Answer 6

applies in employment situations to hold the employer vicariously liable for his employees actions during their scope of employment

Question 7

Scope of Employment

Answer 7

employee was acting with an intent to further his employer’s business interests, even if the employee acted indirectly or unwisely, and even if the employer forbade the employee from such an act.

Question 8

Frolic

Answer 8

employee’s significant deviation from the employer’s business for personal reasons (outside scope of employment)

Question 9

Detour

Answer 9

Employee’s minor deviation from the employer’s business for personal reasons

Question 10

Principal’s Duties

Answer 10

A principal has a duty to deal with the agent fairly and in good faith, including a duty to provide the agent with information about risks of physical harm or pecuniary loss that the principal knows, has reason to know, or should know are present in the agent’s work but unknown to the agent.

Question 11

Independent Contractor

Answer 11

An independent contractor is one who is hired to undertake a specific project but who is left free to do the assigned work and to choose the method for accomplishing it.

Question 12

ABC TEST

Answer 12

If you can not prove all 3 you would be considered an employee.
a. The worker is free from the control and direction of hirer, with regard to performance of the work, both under contract and in fact;
b. The worker performs work outside the usual course of the hiring entities business, and
c. the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Question 13

Disclosed Principal

Answer 13

An agent is acting on a principals behalf and a third party is aware that the agent is acting on his behalf.

Question 14

Unidentified Principal

Answer 14

The third party knows the agent is working for a principal, but does not know who the principal is.

An agent is liable for the contract as well as the principal, unless wither party says they do not want the agent involved in the contract.

Question 15

Undisclosed Principal

Answer 15

The agent acts on the principal’s behalf but third persons dealing with the agent do not know that the agent is acting in an agency role. The third party things they are dealing with the agent and the principal is unidentified.

Question 16

Partnership

Answer 16

A partnership is an association of two or more persons to carry on, as co-owners, a business for profit and includes, without limitation, a limited liability partnership

Elements
1. “An association of” refers to the voluntary nature of the relationship
2. “Two or more persons” - there must be more than one person
3. “to carry on as co-owners a business for profit” - “business” - expressly defined. “co-ownership” a factor in determining whether a partnership exists, and to describe the rights of partners in a partnership with respect to partnership property (a legal consequence of partnership).

Question 17

Equal Dignity Rule

Answer 17

An agent can perform all acts requiring a writing signed by the principal only if the agent’s authority is set forth in a writing.

Question 18

Agent’s actual express authority

Answer 18

The principal tells the agent in detail what he is authorized to do and the agent acts within these directions.

Question 19

Actual Implied Authority

Answer 19

The agent has the authority to perform all acts which are reasonably necessary to carry out his express authority.

The extent of the authority will be defined:
1. by the facts and circumstances surrounding the transaction,
2. by the words used by the parties
3. by the customs of the trade and the area, and
4. by the relations between the principal and the agent.

Question 20

Apparent Authority (Agent by Estoppel)

Answer 20

Created by operation of law and established by a principal’s actions that would reasonably lead a third person to conclude that an agency exists.

Question 21

Ratification

Answer 21

If the principal accepts the benefits, or confirms conduct of agent through verbal or other means, an agency relationship by ratification is created.

A partial ratification of conduct by principal is considered ratification of the entire agency relationship.

Question 22

Inherent Agency Power

Answer 22

The agency relationship includes inherent authority implicit from the relationship itself, consisting of those peripheral powers which a third person would reasonably expect the agent to have under all the circumstances.

Inherent agency power is recognized for the protection of third parties who deal with the agent.

Question 23

Partner Dissociation

Answer 23

1. The partner’s right to participate in the management and conduct of the partnership business terminates, except as otherwise provided in Section 803;
2. The partner’s duty of loyalty under Section 404(b)(1) and (2) and duty of care under Section 404(c) continue only with regard to matters arising and events occurring before the partner’s dissociations unless the partner participates in winding up the partnership’s business

A dissociation means that a partner drops out of is kicked out of the partnership

Question 24

Agency by Estoppel

Answer 24

An equitable doctrine that prevents the principal from denying the existence of an agency relationship when:

1. the principal intentionally or negligently creates an appearance of authority in the purported agent,
2. the third party reasonably and in good faith relies on the appearance of authority, and
3. the third party detrimentally changes his position in reliance.

Question 25

Duties owed by Agent to Principal

Answer 25

1. Fiduciary duty to act with the highest degree of faith and loyalty. 2. Disclose all relevant information to the principal. 3. Use reasonable care and skill 4. Engage in good conduct 5. Obey the reasonable instruction of the principal. 6. Keep and render accounts. 7. acts only as authorized by the principal.

Question 26

Fiduciary

Answer 26

1. one who owes to another the duties of good faith, trust, confidence, and candor. 2. who A duty to act for someone else's benefit, while subordinating one's personal interests to that of the other person.

Question 27

Fiduciary Relationship

Answer 27

1. When one person places trust in the faithful integrity of another, who as a result, gains superiority or influence over the first, 2. When one person assumes control and responsibility over another, 3. when one person has a duty to act for or give advice to another on matters falling within the scope of the relationship, or 4. when there is a specific relationship that has traditionally been recognized as involving fiduciary duties, as with a lawyer and a client or a stockbroker and a customer.

Question 28

Principal's Remedies Upon Breach by Agent

Answer 28

1. Breach of contract damages 2. tort damage. 3. Accounting for profits received by the agent 4. Discharge of duty to pay agent. 5. Indemnification from agent for damages paid by principal. 6. Recission of contract with agent 7. Recission of a contract made with a 3rd party. 8. Restitution for unjust enrichment 9. Recovery for wrongful use of the principal's property 10. injunction to prevent a continued violation.

Question 29

Duties owed by Principal to Agent

Answer 29

1. Compensation 2. Reimbursement for advances 3. Reasonable care to prevent injuries 4. Cooperation 5. Deal fairly and in good faith

Question 30

Agent's Remedies Upon Breach by Principal

Answer 30

1. Contract Remedies 2. Set of of amount paid already to agent 3. Lien against principal's property or attorney's lien against judgement 4. Indemnification by principal 5. Accounting 6. Nonperformance of remaining obligation

Question 31

Piercing the Corporate Veil

Answer 31

Veil protects our personal assets. If there is not a valid corporation filed. When may a court pierce the corporate veil and hold a shareholder personally liable for obligations of the corporation? 1. There must be such unity of interest and ownership that the separate personalities of the corporation and the individual (or other corporation) no longer exist; and 2. circumstances must be such that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice. In order to pierce the corporate veil (make the individuals be individually liable to the 3rd party) 1. unity of interest and ownership between owners and corporation, so that there is no separation between them and allowing the corporation to be treated separately would allow fraud or injustice.

Question 31

Inadvertent partnerships

Answer 31

as a partnership may be formed by action, sometimes parties form partnerships unintentionally. Even though a partnership was not intended, the same legal consequences attach.

Question 32

Exceptions for liability of disclosed princiapl

Answer 32

A principal is liable unless: 1. if the contract is under seal, only the person whose seal appears may be held liable. 2. if the third party would be prejudiced or disadvantaged by not being able to sue the agent. 3. if the contract precludes existence of an undisclosed principal 4. Parol Evidence is allowed to prove the existence of an undisclosed principal.

Question 33

Termination of the Agency Relationship

Answer 33

1. Expiration of the agency term 2. completion of agency's purpose 3. agreement between agent and principal 4. unilateral revocation by the agent or principal 5. substantial change in subject matter of the agency 6. incapacity or death of principal or agent.

Question 34

Two types of rules that apply to rights of partners

Answer 34

1. Mandatory Rules: may not be changed by agreement among the partners. 2. Default rules- ca be changed through the use of a partnership agreement. The partnership agreement may be expressed or implied. it may be a written document signed by the partners; it may be the result of oral communications between the partners; it may be implied from their conduct/

Question 35

Proxy

Answer 35

A shareholder appoints an agent to be there proxy and there duties are to attend meetings and vote on their behalf

Question 36

Partnership Formation

Answer 36

1. Capacity to form a partnership - you just have to know what a partnership is 2. Agreement to form a partnership a. intention of the parties b. whether profits are shared c. whether there is co-ownership of the business - obligation to share in losses -ownership control of the property and business - community of power in administration -rights of parties on dissolution

Question 37

Aggregate

Answer 37

A partnership is a collection of individuals with a common purpose, rather than a separate legal entity. If a partnership breaches a third party 3rd party can sue the partnerships individually

Question 38

Entity

Answer 38

A partnership is a separate legal entity from the persons within it.

Question 39

Partnership property

Answer 39

Property of a partnership includes all property originally brought into the partnership or subsequently acquired so long as the partners intended to devote property to the partnership`

Question 40

3rd party claiming as partner

Answer 40

If a third party holds himself out as a partner, he will be liable to third parties acting upon such representations.

Question 41

Fiduciary duties of Partners

Answer 41

1. Disclose personal dealings with the partnership 2. Answer for breach of fiduciary duty 3. render true and full information to other partners, 4. keep accounts of books or partnership transactions ( not necessary that each partner keep books personally, but each must ensure the books are maintained competently and available to the other partners.

Question 42

Partner as agent of partnership

Answer 42

A partner may 1. enter into k with third parties in behalf of the partnership 2. convey real property on behalf of the partnership, and 3. be held jointly and severally liable for the partnership's tortious actions.

Question 43

A partnership is barred by the Uniform Partnership act from contracting with a third party to

Answer 43

1. Dispose of partnership goodwill, 2. submit partnership litigation to arbitration or 3. execute any agreement having the effect of making it impossible to carry on business

Question 44

Limited Partnership

Answer 44

A limited partnership formed by 2 or more persons under the laws of the state in which it is located, and having one or more general partners and one or more limited partners. A limited partnership requires a formal document to be filed with the state.

Question 45

General Partner

Answer 45

one who owns the business 1. undertakes management and control of the partnership business 2. has sole responsibility for conduct of the business 3. assumes full personal liability for partnership obligations 4. must be named in the limited partnership certificate

Question 46

Limited Partners

Answer 46

1. Contributes money, property or services, or a promise to contribute any of these, and who runs the rusk of losing only his contribution 2. is not personally liable for partnership obligations 3. need not be named in the limited partnership certificate (They can be silent partners)

Question 47

Corporation

Answer 47

A legal entity, created in accordance with statutes, that is separate and distinct from the persons who own its stock or manage it.

Question 48

Professional Corporation

Answer 48

A professional Corporation is an incorporated business structure formed by individuals or groups of individuals that would otherwise be ineligible for corporate formation. The group must be organized with the intent of providing professional services, and must consist of professionals licensed to practice their particular profession.

Question 49

Close corporation

Answer 49

1. Corporation whose stock is not freely traded 2. Stock is held by only a few shareholders (max 30-50) In CA the max is 35 shareholders. 3. Often has restrictions on transfer of shares in the by laws 4. shareholders usually involved in the operation of the business 5. often family-owned 6. In many states, may operate less formally than other corporations, for example, allowing decisions to be made by the shareholders rather than requiring meetings of the board of directors.

Question 50

Public Corporation

Answer 50

A C corporation, but shares are traded to and among the general public Typically a large number of shareholders- hundreds of thousands. Costs a great deal of money to "go public"

Question 51

Nonprofit corporation

Answer 51

Formed to carry out a charitable, educational, religious, literary, or scientific purpose, rather than being formed to generate profits. Can raise funds by soliciting public and private grant money and donations from individuals and companies. Federal and state governments do not generally tax nonprofit corporations on money they take in that is related to their nonprofit purpose, because of the benefits they contribute to society. Provides many of the same shields from liabilities to its shareholders that a traditional corporation provides Can generate profits, but that must not be its primary intent, and all profits must be used in furtherance of the non-business goals of the nonprofit corporation No capital distributions or dividends paid to shareholders in a nonprofit corporation.

Question 52

Inherent agency power

Answer 52

inherent agency power is a term used in the restatement of this subject to indicate the power of an agent which is derived not from authority, apparent authority or estoppel, but solely from the agency relation and exists for the protection of persons harmed by or dealing with a servant or other agent.

Question 53

Want to form a corporation

Answer 53

1. All parties (agents) agree they want to form a corporation. Promoters 2. Choose a business name 3. Appoint initial directors. 3. Prepare and file articles of Incorporation Usually must contain: a. name of corporation. b. purpose of corporation (can be broad) c. number of shares the corporation is authorized to issue d. must be filed with the state 4. Draft initial bylaws - bylaws set forth the rules for management of the corporation. 5. Set up an initial meeting of the board of directors. - Tasks typically performed at initial directors' meeting. 6. Issue initial shares. 7. Active v Passive shareholders Active Shareholders- actively participate in running the business. Passive Shareholders- invest money by purchase shares only, but do not have any involvement in running the company. 8. Obtain necessary licenses and permits. a. business license from city or county. b. seller's permit from the state. c. zoning permit from county planning board. d. register with IRS.

Question 54

Defective Incorporation

Answer 54

All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this Act, are jointly and severally liable for all liabilities created while so acting.

Question 55

De Jure Corporation

Answer 55

Complies or substantially complies with formation laws

Question 56

De Facto Corporation

Answer 56

Lacks compliance with formation laws, but is treated as if it were a corporation because the directors, officers, and shareholders: acted in good faith, thinking corporation was valid. under a valid statute. for an authorized purpose executed articles of incorporation.

Question 57

Corporation by Estoppel

Answer 57

Equitable doctrine preventing a 3rd party from holding owners personally liable for an invalid corporation because the 3rd party dealt with the entity as if it were a corporation.

Question 58

Alter Ego Test

Answer 58

Veil piercing may occur if the shareholders have failed to follow corporate formalities in running the business. For ex: 1. owners failed to issue any stock. 2. owners failed to hold directors' meetings. 3. owners did not keep clear corporate min utes or records. 4. owners commingled funds.

Question 59

Reverse Veil Piercing

Answer 59

one corporation is so controlled by another that their separateness should be disregarded 1. failure to maintain adequate corporate records or to comply with corporate formalities, 2. commingling of funds or assets, 3. undercapitalization, and 4. one corporation treating the assets of another corporation as its own.

Question 60

Promoter

Answer 60

Is an agent of a corporation that is not yet formed. Promoter's fiduciary duty 1. duty not to make a profit at the expense of a co-promoter. 2. duty not to engage in secret dealings. 3. duty of full disclosure and fair dealing for all corporate matters. 4. duty to disclose any dealings in which the promoter has a personal interest.

Question 61

If promoter contracts in name of corporation "to be formed"

Answer 61

if the corporation is never formed, then promoter is personally liable. if the corporation is formed but doesn't adopt contract, then promoter is personally liable. if the corporation is formed and adopts contract, then the intent of the parties is determinative.

Question 62

INHERENT AUTHORITY

Answer 62

THE AUTHORITY HELD BY THE OFFICER, EMPLOYEE, OR OTHER AGENT BY REASON OF HIS PARTICULAR CORPORATE POSITION

Question 63

ULTRA VIRES DOCTRINE

Answer 63

BEYOND THE SCOPE Under the common law, a shareholder can have a corporate action declared void if the action exceeds the powers or the stated purposes of the articles of incorporation. Modernly, many corporate acts will be validated even though they may be ultra vires.

Question 64

Partnership at will

Answer 64

a partnership at will only exists as long as all the partners want it to.

Question 65

Term Partnership

Answer 65

one where the partners have agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking.

Question 66

Partner's liability

Answer 66

Pre-dissociation debt: LIABLE Post-dissociation debt: NOT LIABLE General Exceptions: 1. Creditor believed the dissociated partner was still a partner: Section 703(b) 2. Creditor released the dissociated partner: Section 703(c) 3. Creditor changed the obligation after dissociation: Section 703(d)

Question 67

Time Value

Answer 67

The time value of money simply recognizes the economic principle that over time any present sum of money can, if properly invested, actually "grow" into a greater sum of money by the end of the specified future time, irrespective of any effects of possible future inflation.

Question 68

COMPOUND INTEREST

Answer 68

Total= PRINCIPAL X (1+RATE)YEARS

Question 69

PRESENT VALUE

Answer 69

PV= FV X 1/(1+R)N PV = PRESENT VALUE FV= DESIRED FUTURE VALUE R- RATE OF INTEREST (DISCOUNT RATE) N= TOTAL NUMBER OF YEARS

Question 70

PRESENT VALUE OF A FUTURE INCOME STREAM

Answer 70

PV= WD [ ( 1- ( 1 / ( 1 + R ) ^N ) ) /R ] PV = PRESENT VALUE WD = DESIRED FUTURE WITHDRAWL R- RATE OF INTEREST (DISCOUNTED RATE) N - TOTAL NUMBER OF PERIODS OVER WHICH THE WITHDRAWALS WILL BE MADE

Question 71

INFLATION

Answer 71

A GRADUAL INCREASE IN THE COSTS OF BASIC GOODS AND SERVICES THAT OCCURS THROUGHOUT THE ECONOMY OVER THE COURT OF TIME AND WHICH HAS THE GENERAL EFFECT OF LOWERING THE " PURCHASING POWER" OF MONEY.

Question 72

THE PFEIFER DECISION

Answer 72

THE CALCULATIONS AS AN UPWARD ADJUSTMENT MADE TO ACCOUNT FOR THE EFFECTS OF POTENTIAL INCREASES DUE TO THE EFFECTS OF FUTURE INFLATION OR OTHER FACTORS; AND A SUBSEQUENT DOWNWARD ADJUSTMENT TO "PRESENT VALUE" TO ACCOUNT FOR THE TIME VALUE OF THE ACTUAL "LUMP SUM" AWARD.

Question 73

"REAL RATE" METHODOLOGY

Answer 73

THE DAMAGE AWARD MUST BE INCREASED BY THE REAL RATE OF INCREASE AND THEN SUBSEQUENTLY DECREASED TO ITS PRESENT VALUE BY UTILIZING THE REAL RATE OF DISCOUNT. Does the proposed evidence pertain specifically to some unique aspect of plaintiff's personal employment in his or her particular profession or industry that could potentially inflate plaintiff's projected future earnings?

Question 74

INFLATION-REDUCTION METHODOLOGY

Answer 74

THE DAMAGE AWARD MUST BE INCREASED BY THE RATE OF FUTURE PRICE INFLATION AND THEN SUBSEQUENTLY DECREASED TO ITS PRESENT VALUE BY UTILIZING THE ACTUAL MARKET RATE OF INTEREST (ALSO KNOWN AS THE MARKET RATE OF DISCOUNT, WHEN IT IS USED TO DISCOUNT TO PRESENT VALUE) this method assumes that future economic inflation will in fact occur and that the actual rate of that future inflation can be predicted and measured with reasonable economic certainty.

Question 75

TOTAL OFFSET METHODOLOGY

Answer 75

DOESNT UTILIZE ANY INTEREST RATES AT ALL, SINCE NO ADJUSTMENT WHATSOEVER IS MADE THE THE ACTUAL DAMAGE AWARD.

Question 76

RUPA SECTION 401(A)

Answer 76

Each partner is deemed to have an account that is: 1. credited with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, the partner contributes to the partnership and the partner's share of the partnership profits; and 2. charged with an amount equal to the money plus the value of any other property, net of the amount of the liabilities, distributed by the partnership to the partner and the partner's share of the partnership losses.

Question 77

Revised Uniform Partnership Act Section 807(a)

Answer 77

In winding up a partnership's business, the assets of the partnership, including the contributions of the partners required by this section, must be applied to discharge its obligations to creditors, including, to the extent permitted by law, partners who are creditors, Any surplus must be applied to pay in cash the net amount distributable to partners in accordance with their right to distributions under subsection (b)

Question 78

RUPA 807 (d)

Answer 78

After settlement of accounts, each patner shall contribute, in the proportion in which the partner shares partnership losses, the amount necessary to satisfy the partnership obligations that were not known at the time of the settlement and for which the partner is personally liable under Section 306

Question 79

Section 303- RUPA

Answer 79

(a) Except as otherwise provided in subsection (b), all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law. (b) A person admitted as a partner into an existing partnership is not personally liable for any partnership obligation incurred before the person's admission as a partner. (c) An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership. A partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for such a partnership obligation solely by reason of being or so acting as a partner. This subsection applies notwithstanding anything inconsistent in the partnership agreement that existed immediately before the vote required to become a limited liability partnership under Section 1001(b).

Question 80

Section 807(c) of RUPA

Answer 80

If a partner fails to contribut the full amount required under subsection (b), all of the other partns shall contribute, in the proportions in which those parters share partnership losses, the additional amount necessary to satisfy the partnership obligations for which they are personally liable under Subsection 306. A partner or partner's legal representative may recover from the other partners any contributions the partner makes to the extent the amount contributed exceeds that partner's share of the partnership obligations for which the partner is personally liable under Subsection 306.

Question 81

Partner's shares of profits and losses - RUPA 103(a)

Answer 81

If the partnership agreement specifies how to share profits and or losses, that governs, but if the partnership agreement doesn't specify how to share profits and or losses, RUPA 401(b) says to use the following default rules: profits are equal and losses are the same as profits.

Question 82

Duty of Care

Answer 82

A director shall discharge his duties as a director, including his duties as a member of a committee: 1. in good faith 2. with ordinary care 3. in a manner of the best interest of the corporation.

Question 83

Duty of Loyalty

Question 84

Business judgment rule as a defense.

Answer 84

A director or officer who make a business judgment in good faith fulfills the duty of care if he or she: `1. is not interested (no conflict of interest) in the subject of the business judgment. 2. is informed to the extent he reasonably believes to be appropriate under the circumstances, and 3. rationally believes the business judgment is in the best interests of the corporation